Question of the Day

Which is the greatest 'witch hunt' in American history?

NEW YORK | Wealthy hedge-fund operator Raj Rajaratnam and a co-defendant pleaded not guilty Monday to charges that they were major players in a scheme that used inside information to make stock trades that generated millions of dollars in profits.

Prosecutors, who have described the case as a “wake-up call for Wall Street,” promised to hand over to defense attorneys 100 hours of intercepted phone calls made over eight months that they say implicate the defendants.

Mr. Rajaratnam and Danielle Chiesi entered their pleas before U.S. District Judge Richard Holwell in Manhattan to an indictment returned last week in a $52 million insider trading case that has resulted in charges against 21 people.

Assistant U.S. Attorney Josh Klein asked Judge Holwell to set a trial date in June or July but defense lawyers balked, saying it would take months to review the audiotapes of telephone conversations between the defendants.

Judge Holwell declined to set a trial date but said he may eventually agree with prosecutors and schedule a summer trial. Mr. Klein also said evidence against the defendants includes post-arrest statements.

Sri Lankan-born Mr. Rajaratnam, 52, of Manhattan, with an estimated $1.3 billion in net worth, and Ms. Chiesi, 43, of New York City, were indicted on conspiracy and securities-fraud charges after their October arrest. Both are free on bail and were friendly to one another in court.

U.S. Attorney Preet Bharara said at the time of the arrests that the case marked the first time prosecutors had made extensive use of wiretaps in a hedge-fund insider-trading case.

The government says Mr. Rajaratnam carried out the scheme from a powerful post as the founder of the Galleon Group, a hedge fund that managed as much as $7 billion in assets at one point after its 1996 creation. Ms. Chiesi worked for New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc. that had assets of about $1 billion under management.

In court papers, lawyers for Mr. Rajaratnam have disputed the charges, saying he based trades on information that was already public. They also indicated they will fight the wiretaps, saying the government misled a judge into allowing investigators to surreptitiously tape phone conversations.

Government documents have detailed some of the conversations.

In one conversation with a government informant about a pending deal, Ms. Chiesi is quoted as saying: “I’m dead if this leaks. I really am … and my career is over. I’ll be like Martha [expletive] Stewart.”

Ms. Stewart, the homemaking maven, was convicted in 2004 of lying to the government about the sale of her shares in a friend’s company whose stock plummeted after a negative announcement. She served five months in prison and five months of home confinement.